The Government in November 2008 passed its final RESPA (Real Estate Settlement Procedures Act) Rule which released the new GFE (Good Faith Estimate) and the revised version of the HUD-1 Settlement Statement. HUD (our Government) estimated that more clear disclosure of costs and limits on the amount that estimates may change will help consumers save an AVERAGE of $668 in closing costs. In this ruling the mortgage industry would be required to use the updated forms beginning January 1, 2010. Well over a year in its passing and moving towards that date things could not be more from the truth. Consumers will NOT save any money at all, as a matter of fact in most cases will pay far more than they've ever did before. Let me explain:
Under other government changes they now will not allow any mortgage originator including bank originators to order appraisals. All orders must go through appraisal service companies that are controlled by the lenders and banks themselves. The increase in appraisal fees have been increased 39% for single family appraisals from $300 to $510 and 34% for multi-family homes from $450 to $690. Right there is an addition cost of between $210 -$240.
Secondly, each national and regional lender we represent has increased thier fees as well. One example is an increase in bank underwriting fees of over 39% from $350 to $575. That in another increase of at least $225.00.
The biggest increase can come from the amount of time consumers can lock their rate and terms with lenders. In the past we originators could counsel our clients in locking with either 15, 20, 30, or 45 day lock periods. Locking in loans for short periods of time would allow consumers to save money, the less time to lock the cheaper the fees (points). The typical price difference could range from .125 to .375 percent. On an average loan size of $175,000 that could range from paying $218 to $459 less for closing costs. Now with the new regulations under RESPA and TILA and the days needed for disclosure and re-disclosure purposes, consumers will not be allowed to lock in loans for these periods unless the loan is approved and already cleared to close. Most consumers, upon application, want the comfort of knowing that the quoted and signed rate at application is the rate and terms they will be receive upon closing. That choice can only be offered if the consumer locks in for at least 60 days or longer. With that one change the consumer will no longer have the option to close for shorter terms which will now increase their costs an average of $338.00 dollars.
The last and probably the most important is the governments change in licensing laws in their passage of S.A.F.E. Act in 2008. This new acted establishes licensing and registration process that will allow them to have greater control in the mortgage industry. In my opinion it is very good for the industry and consumer in the long run, however it does create a back lash effect on the consumer. The regulations and rules are very complex. They are not difficult or hard but very confusing as each state transitions from very little regulations to an overbearing amount. This is very good as it will weed out the less professional that have operated in the business for the past 10 years but is very bad for the consumer as they will have less choice and competition. That being said the consumer will find that they will have less to chose from which may increase their costs merely by having less competition.
I applaud the government with thier attempts to save people money and make it even more fair, but when they try to justify thier actions by making statements that the consumer is going to save an average of $668 in settlement charges lets be truthful about it. Even though we are only now getting the true impact of what the actual costs are coming it at, you did not need to be a genius to figure it would drastically increase costs to the consumer. So in thier own estimates that these new changes would save consumers once implemented over $8.3 Billion dollars the opposite is true. They've just cost the consumer that amount or possibly even more.
Thanks government for trying, I know you want everything to be equal and fair. Life if not fair, when are you going to wake up. Oh ya, you don't care because you make the laws and the laws that apply to us, don't apply to you. Where can I get a V.I.P. mortgage?
Suggestions to law makers and the Federal Government, instead of spending your time playing legislative games and trying to figure out who is going to contribute to your next campaign and making up laws you have very little knowledge and/or experience in and justified by the thousands of pages created in making them, just save yourself the time on putting on the great shows in congress trying to impress us about how hard your working because we don't care anymore, just start enforcing the penalties already on the books with violators and people committing fraud. You would be saving the environment by cutting down less trees......